Navigating the complexities of abandoning your green card can be overwhelming. Understanding the regulations can make the process smoother.
Understanding the Abandonment Process
Abandoning your green card is a significant decision that involves a formal process. It's essential to understand that this is not automatic and requires specific actions. The abandonment process typically begins with the submission of Form I-407, also known as the Record of Abandonment of Lawful Permanent Resident Status.
The process can be initiated by sending Form I-407 and your Green Card to the Department of Homeland Security. Once you have willingly surrendered your green card, you are no longer considered a lawful permanent resident of the United States. However, determining the exact date when you cease to be a green card holder can be complex and is influenced by various regulations, including US tax regulations.
Key Regulations You Need to Know-301.7701(b)-1(b)(3)
One of the critical regulations to consider is 301.7701(b)-1(b)(3), which pertains to the tax status of individuals in the process of abandoning their green card. This regulation does not explicitly state the exact date when your status as a lawful permanent resident ends. Instead, it leaves some ambiguity, which can complicate your tax obligations.
Here are the pertinent regulations.
(3) Administrative or judicial determination of abandonment of resident status. An administrative or judicial determination of abandonment of resident status may be initiated by the alien individual, the Immigration and Naturalization Service (INS), or a consular officer. If the alien initiates this determination, resident status is considered to be abandoned when the individual's application for abandonment (INS Form I-407) or a letter stating the alien's intent to abandon his or her resident status, with the Alien Registration Receipt Card (INS Form I-151 or Form I-551) enclosed, is filed with the INS or a consular officer. If INS replaces any of the form numbers referred to in this paragraph or §301.7701(b)-2(f), refer to the comparable INS replacement form number. For purposes of this paragraph, an alien individual shall be considered to have filed a letter stating the intent to abandon resident status with the INS or a consular office if such letter is sent by certified mail, return receipt requested (or a foreign country's equivalent thereof). A copy of the letter, along with proof that the letter was mailed and received, should be retained by the alien individual. If the INS or a consular officer initiates this determination, resident status will be considered to be abandoned upon the issuance of a final administrative order of abandonment. If an individual is granted an appeal to a federal court of competent jurisdiction, a final judicial order is required.
The Regulations above say, "shall be considered to have filed a letter...If such letter is sent by certified mail, return receipt requested (or a foreign country's equivalent thereof)." This sentence means that when a person sends his I-407 and Green Card, that day (mailing date) is considered the last day as a Green Card Holder. However, the following sentence says, "proof that the letter was mailed and received. " Also, there is a section that says when the letter is filed with the INS..." The author believes that the Regulations are not clear enough when the last day as a Green Card holder. The issue of ambiguity is keener today because expatriating individuals must send I-407 and his/her Green Card from overseas. Usually, there are at least 7 days of mailing time. Because I believe that there are no other US tax guidelines further explaining these regulations, we have no other choice but to interpret the rules itself.
Tax Implications of How You Interpret the Regulations
The question is whether the date of receipt or the date of mailing. Practically, this makes a significant difference. Under 877 and 877A, you may not be a covered expatriate, or your exit tax liabilities and regular tax liabilities for your dual status returns may differ.
The author believes one can take either position by reading the regulations (i.e., the mailing or receipt date). The author recommends consulting with your tax advisor about which day you want to take as the last day as a Green Card holder simply because there is no other guidance.
Disclaimer
Tax laws always have exceptions. We aim to provide broad guidance in simple, understandable language. We recommend any reader consult with appropriate paid professionals to obtain tailored guidance after disclosing your facts and circumstances. Our blogs do not provide professional opinions to readers. The author assumes no legal responsibility for this blog.